South Korea’s Financial Services Commission and Korea Securities Depository have presented a phased roadmap for issuing, trading, clearing and settling tokenized stocks, bonds and funds. The new rules are scheduled to take effect on Feb. 4, 2027, laying the groundwork for traditional securities to be issued and traded in tokenized form.

Blockchain platform Avalanche said its infrastructure would be used in the initiative, which it called one of the largest government tokenization projects. Avalanche said South Korea was building a digital capital market in which traditional securities could eventually be issued, traded and settled onchain.

The FSC’s document, however, describes a phased construction of the necessary infrastructure rather than an immediate move of the entire capital market to blockchain.

FSC Vice Chairman Kwon Dae-young said:

“We will not allow tokenized securities to remain merely a tool for fractional investing. Through a strategic, phased approach, we will lay the foundation for issuing and trading traditional financial products such as stocks, bonds, and funds in tokenized form.”

Kwon said authorities aim to connect issuance, trading, clearing, settlement and the exercise of investor rights within a single digital market.

Three-stage tokenization plan

The first phase will cover private money market funds for institutional investors, privately placed corporate bonds for institutional investors, non-public shares issued through a trust model and publicly offered fractional investment securities.

South Korea also plans pilot projects to tokenize exchange-traded stocks with the participation of the Korea Exchange. The regulator said it would consider the experience of pilot programs operated by the New York Stock Exchange and Nasdaq when developing its approach.

The second phase would expand tokenization to publicly offered securities. In the third phase, authorities plan to establish onchain payment infrastructure that would allow stablecoins to settle tokenized securities. The roadmap does not set an exact timetable for the second and third phases.

Licensing and investor limits

South Korea does not plan to create a separate license for tokenized securities. Companies holding the relevant brokerage or trading licenses would be permitted to handle the assets under their existing authorizations. Additional consultations with the financial regulator are planned for over-the-counter venues.

Retail investors’ annual net purchases of tokenized securities on any single OTC venue would be capped at 100 million won, or about $74,000.

The FSC also plans requirements for companies seeking to manage accounts for tokenized-securities holders independently. Those companies would need at least 4 billion won, or $2.97 million, in their own capital and specialists in account management, internal controls and information technology.

The regulator plans to prepare amendments to secondary regulations by the end of September 2026. The Korea Securities Depository and financial companies are expected to build the necessary infrastructure before the first phase begins in February 2027.

Source: Incrypted